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This article appears in the following Oxford Review of Economic Policy issue: CLIMATE CHANGE [View the issue table of contents]
Climate-change policy: why has so little been achieved?
* New College, Oxford, e-mail: dieter{at}dhelm.co.uk
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Abstract |
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While the scientific evidence for climate change grows, the policy responses have so far had little or no impact on the build-up of emissions. Current trends in emissions are adverse. The paper considers why the disconnect between science and policy exists and, in particular, why the Kyoto Protocol has achieved so little. Some contributing factors considered are: the focus on carbon production rather than consumption in the architecture of Kyoto; the flaws in the analysis presented in the Stern Report (notably on the impacts of climate change on economic growth, on the costs of mitigation, and on discounting); and the political economy of the choice of policy instruments, the politics of the rents that arise, and the technology bias. The challenges facing the Copenhagen conference are noted, and it is concluded that, with a recasting of the economics of climate change, the prospects for closing the gap between the science and policy are grim.
Key Words: climate change • Kyoto • Stern Report • energy policy • climate change policy • climate change science
Comments from, and discussions with, Chris Allsopp, Robin Smale, Cameron Hepburn, Christopher Bliss, and Paul Klemperer are gratefully acknowledged. The errors remain mine, unfortunately.
1 Throughout carbon dioxide (CO2) is used as a proxy for greenhouse gases.
2 The IPCC has produced a series of reports (IPPC, 1995, 2001, 2007), and reactions, notably House of Lords (2005), but as an exercise in international collaboration, it is unprecedented.
3 Indeed, the UK set up its own emissions-trading scheme to address its domestic 2010 carbon target. See Marshall Task Force (1998).
4 The references throughout are to the 2007 version of the Stern Report.
5 See the paper by Paul Collier, Gordon Conway, and Tony Venables in this issue (Collier et al., 2008).
6 Nuclear power stations have a typical lead time of around 10 years. Given that existing nuclear plants are reaching the end of their lives in a number of European countries (notably Germany and the UK), plant closures and output reductions are likely to exceed new plants coming into the systems in Europe until at least the mid- to late 2020s.
7 IMF (2008, p. 10, box 4.1). The current number is around 0.5 billion.
8 General Administration of Civil Aviation, China, January 2008. Chinese passenger air traffic grew 16 per cent in 2007, and is projected to increase by 11.4 per cent p.a. until 2020. Freight is projected to grow at 14 per cent p.a. over the same period.
9 In the UK, major airport expansions are planned for Heathrow and Stansted. The 2003 White Paper, ‘The Future of Aviation’ reports that UK air travel has increased fivefold in the last 30 years (Department for Transport, 2003). Half the population now flies at least once a year. Unconstrained (by capacity) forecasts are for demand to double or triple by 2030.
10 The concept is associated with the Hubbert Curve, named after M. King Hubbert, who predicted in 1956 that US oil production would peak between 1965 and 1970. He subsequently predicted that global oil production would peak in 1995–2000.
11 Oil-enhanced recovery (OER) is already a deployed technology in Norway. See http://www.Norway.org.vn/business/oil/carbonemissions.htm
12 See, for example, House of Lords (2005) and Lawson (2008).
13 Within the EU, Spain and Portugal had by 2002 both increased their emissions by over 40 per cent above the 1990 levels.
14 See NAO (2008) for a discussion of the various measurement issues, and Helm et al. (2007).
15 A series of proposals for a post-Kyoto agreement are set out in Aldy and Stavins (eds) (2007).
16 NAO (2008) argues in response that because the calculation of carbon consumption is more complex—and hence uncertain—we should therefore continue to use production-based measurements. In other words, it is better to be more precisely wrong than approximately right (Wiedmann et al., 2008).
17 See the article by Jiahua Pan, Jonathan Phillips, and Ying Chen in this issue (Pan et al., 2008).
18 The exception here is China, where since 2000 there has been a shift towards energy and carbon intensity. See Rosen and Houser (2007).
19 See Dasgupta and Mäler (2000) and Dasgupta (2001) for a more detailed discussion.
20 A few examples include Baroso, Blair, Brown, and Sarkozy in Europe. US politicians have been less willing to endorse this number.
21 Nordhaus's criticism that the Stern Report has not been subject to the normal process of peer review is particularly important in respect of this chapter and the supporting paper (Nordhaus, 2007).
22 It is interesting to note that Cameron Hepburn and Nicholas Stern (2008, this issue) correctly place significance on the non-marginal nature of climate-change impacts on the one hand, but do not recognize the non-marginal nature of mitigation policies to achieve the sharp reductions in emissions on the other.
23 Stern himself acknowledges this gap in his analysis. In the Financial Times (16 April 2008), he is quoted as saying: ‘I probably would have emphasized the importance of good policy [if writing the report again today] and how bad policy puts up the costs [of cutting emissions]’.
24 This rent-seeking behaviour is also prevalent in the allocation of R&D funding. See Cohen and Noll (1991).
25 The case was summarized by Tony Blair in The Economist: ‘A year of huge challenges’, 29 December 2004.
26 Nor, indeed, any other senior US politicians on the basis of the British policy approach.
27 An accompanying technical paper to the 2003 White Paper set this out (DTI, 2003b).
28 On behavioural approaches and explanations, please see the article by Kjell Arne Brekke and Olof Johansson-Stenman (2008; in this issue).
29 Note, however, that these growth rates are unlikely to be uniformly distributed. Indeed, lower growth rates may well occur where damage is highest.
30 See Hepburn and Stern (2008) in this issue for further discussion.
31 The UK government is about to publish another review of the Renewables Obligation and Renewables Obligation Certificates scheme (BERR, 2008), and the opposition parties are also committed to reform. This is classic political and regulatory risk which has an impact on the cost of capital—itself very significant in overwhelmingly capital-intensive industries.
32 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions (2008).
33 See the paper by David Victor (Victor, 2008) in this issue.
34 For a discussion of cap-and-trade schemes in the USA, see the article by Robert Stavins in this issue (Stavins, 2008).
35 As Victor (2008) argues, in this issue, geo-engineering may be an exception. See also the article by Scott Barrett in this issue (Barrett, 2008).
36 House of Commons Environmental Audit Committee (2008).
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